Millennials is at the greatest risk of falling into debt

Swedes born in the 1980s and 1990s are more likely to end up in a debt trap than other generations. This age group is particularly affected because they have taken on significant loans but have not yet reached sufficient income levels. Future interest rate hikes or maturing loans could lead many to struggle to cover their expenses. This is revealed in an analysis conducted by the loan comparison service Sambla.

The so-called millennial generation, individuals born between 1981 and 1996, has been significantly affected by the economic situation in Sweden. They are, in fact, the generation with the highest debt ratio, which denotes the relationship between a person's loan size and income. This age group has also seen a substantial increase in debt amounts registered with the Swedish Enforcement Authority - an increase of 1.8 billion SEK during 2023 compared to the first half of 2022 (ages 26-44), and this figure is expected to rise even further in 2024.

"There are many facing tough economic times, especially in this generation as they've acquired substantial loans they haven't yet managed to pay off. Our advisors encounter individuals daily who struggle to manage day-to-day finances, with rising interest rates being the primary cause," says Jasmin Svraka, General Manager Sweden, Sambla Group.

According to a standard calculation performed by Sambla, an individual in Sweden with an after-tax income of 23,092 SEK (median income for this age group) between 2022 and 2023 has seen their surplus income decrease from approximately 8,400 SEK per month to about 2,700 SEK.

Simultaneously, as expenses rise, real wages are decreasing. In 2022, it was the first year in several decades where real wages decreased compared to the previous year. Further interest rate hikes or worsened conditions, such as when fixed-rate loans expire, would mean more individuals would struggle to cover their costs.

"Beyond the immediate short-term consequences, there are long-term aspects to consider. Even those who weather tougher times won't be able to afford to save to the same extent, potentially leading to a lack of financial safety net and lower pensions," explains Jasmin Svraka.

The example calculation demonstrates the difference in monthly costs between 2022 and 2023. Sambla Group used the Swedish Consumer Agency's household expense calculation for 2022 and 2023, revealing a 16.8 percent increase in household costs over a year.

For the example person, interest costs between January 2022 and October 2023 have risen by 241 percent, from about 1,818 SEK to 6,195 SEK per month.

Between 2022 and 2023, this individual has gone from having approximately 8,400 SEK surplus per month to now having about 2,700 SEK.

This calculation does not include expenses like gym memberships, savings, or pension contributions. Nor does it consider a potential interest rate deduction.

The calculation is based on public statistics and is an estimate and generalization of how an individual's financial situation might appear.

The calculation assumes a young adult living alone. The income is based on median income data for residents in Sweden, an average of median income in 2021 for ages 25-44 (source: Statistics Sweden).

Housing costs are based on the assumption of an average living space of 42 square meters, resulting in an average monthly housing association fee of 2,293 SEK. The property value is based on the average square meter price for housing associations, which is 43,600 SEK/square meter in Sweden. The loan amount is based on a 15 percent down payment and borrowing the remaining amount. Mortgage interest rates are based on Statistics Sweden's data on mortgage rates (new and renegotiated agreements) at 1.40 percent in January 2022 and 4.78 percent in October 2023.